Acquirers’ and Inheritors’ Dilemma: Discovering Life Purpose and Building Personal Identity in the Presence of Wealth

DENNIS T. JAFFE AND JAMES A. GRUBMAN

DENNIS T. J AFFE Get to know two things about a man. How of inheritance and succession in their families, is a partner at Relative he earns his money and how he spends it. and how people raise their children. In under- Solutions LLP in You will then have the clue to his character. standing these issues, an advisor can help clients San Francisco, CA. You will have a searchlight that shows up [email protected] and their families move toward a more satis- the inmost recesses of his soul. You know fying and productive relationship with wealth, JAMES A. GRUBMAN all you need to know about his standards, something that is often missing in the lives of is a psychologist his motives, his driving desires, his real the rich. and wealth consultant in religion. Turners Falls, MA. – Robert J. McCracken [email protected] THE LIFE JOURNEYS OF WEALTH If you want to know what God thinks of money, just look at the people he gave it to. Much has been written in recent decades about the experiences of the very rich. In the – Dorothy Parker popular literature, in biographies and personal hen a professional advisor sits accounts, in psychology, and in family therapy down with a wealthy client to and family business consulting, views of the discuss money management, wealthy have been largely negative until very the focus is typically on the recently. Beginning with the ’60s rejection of Wmoney, not on the person who owns it. Yet wealth and privilege, some Inheritors began personal wealth is never truly impersonal. It has to question their upbringing and their culture powerful emotional meanings influencing the through their accounts of self-destructive choices, relationships, and life goals of the behavior and confusion about handling inher- owner and his or her family. itances. The mid-’80s brought several land- This article looks at the experience of mark studies of Inheritors, drawing back the the very wealthy family, particularly its mem- curtain on many of the difficulties experienced bers’ growth and development in relating to by those raised with wealth. With the great their wealth and its role in their lives. We will financial gains of the ’80s and ’90s, the newly look at how various origins of wealth can be affluent (many of them young and products of a source of internal conflict, how individuals the ’60s) began to articulate a more reflective struggle to come to terms with great wealth, view about success and sudden wealth. Most and how the quality of their adjustment can recently, there has been a shift toward positive influence what happens with the money. This aspects of wealth as exemplified by the turn life experience looms large over many areas— toward social responsibility and active philan- financial choices, how individuals face issues thropy. Time magazine’s People of the Year in

FALL 2007 THE JOURNAL OF WEALTH MANAGEMENT 1 2005 were philanthropists Bill and Melinda Gates. We culture toward the promised land of wealth. This journey attempt to organize the themes from this diverse litera- may be arduous over years of entrepreneurial labor, or it ture into a framework useful to the family wealth advisor may be a sudden leap produced by the right sequence of and to the wealthy family itself. Some of our formula- Powerball numbers. Either way, acquired wealth involves tions about personal development will be familiar to psy- navigating a change from one social class and culture to chotherapists but not necessarily to people in financial another, with all the attendant pleasures, stresses, losses, advising fields. and new language this change brings. Acquirers of wealth People come to wealth in essentially two ways: they are, in a sense, like immigrants. They undergo the life- acquire it during their lifetime through effort or chance, changing experience of traveling to a more affluent or they inherit it from someone else’s reserve. The way country from their homeland. This life experience of by which a person comes into wealth is an important undergoing a major transition is one of two significant determinant of how wealth affects his or her personality factors about acquired wealth. and character. We first explore the experiences of those A second fundamental point is that these individ- who acquire wealth, looking at how they must come to uals come to their new status having already developed grips with their good fortune and how they raise their much of their personal identity in the economic culture children under new circumstances. We then examine the of their birth. Although personality continues to undergo very different experience of Inheritors who are raised development well into adulthood, the reality is that many with wealth, those who come into the world surrounded aspects of basic personality are in place by the ages of 12 by the benefits and drawbacks of upper-class life. to 18 (Erikson [1950]; Levinson [1978]). Since the foun- Clients’ relationship with money depends on where dation of personal identity is formed largely in the cul- they come from—their personal and family history—and ture and economic class of childhood circumstances, those where they are heading with the possibilities inherent in adults who become wealthy in adulthood must undergo their good fortune. Our goal is to define how the pres- adjustment in who they are. Even for those who achieve ence of wealth in one’s life shapes one’s personal sense of wealth early (in their 20’s and 30’s), many aspects of per- self—through the development of a personal identity as sonality have already been set by the formative experi- a wealthy individual, by one’s developmental life journey, ences of youth. This, then, is the other significant factor: and by the legacy that families pass on to their children. with acquired wealth, one’s identity is partly or wholly estab- We propose that development of an individual’s wealth lished before the wealth occurs. The task for those with New identity moves through stages, ranging from innocence of Money is to find ways to successfully integrate the wealth the power and pain of wealth, through a level of conflict into identity. We view this as “The Acquirer’s Dilemma”— over the wealth, to the achievement of a sense of recon- the sometimes arduous process of incorporating wealth ciliation and integration with wealth. For some, there is into the personal identity already in place. the potential to achieve a strong and positive life purpose Inherited wealth by contrast, describes those of with wealth. Although such a progression is not shared by multigenerational wealth who are born into the upper everyone, the pathway seems universal enough to be pre- socioeconomic level. They are the natives of the land of sented as a useful model of development. Our hope is wealth, the children, grandchildren, and succeeding gen- that, by learning the inherent dilemmas of wealth and the erations of those who first made the journey to riches. means of resolving them, advisors can ask their clients Compared to the transition in socioeconomic class that “the questions that lie behind the wealth.” acquirers experience, the experience in multi-generational wealth is of maintenance of one’s class, not transition. Inher- ACQUIRED AND INHERITED WEALTH itors may be fortunate to improve their wealth status by their own efforts, thereby achieving that rare combina- Acquired wealth can be defined as a significant rise tion of being both Inheritors and acquirers. More often, in socioeconomic level within one generation. A hall- wealth maintenance occurs through the skillful resources mark of acquired wealth is the psychological and socio- of the family’s wealth managers. Some transition in wealth logical sensation of transition. The individual achieving status may conceivably bring the individual or family to wealth status travels not across distance but across socio- an even more rarefied level of wealth, as in the transfor- economic class, setting out from blue-collar or middle-class mation of a merely rich $15 million family to an ultra-rich

2 ACQUIRERS’ AND INHERITORS’ DILEMMA FALL 2007 $500 million family. For most heirs, however, the fear is differently by others, having access to new opportunities of losing the wealth and transitioning downward in socioe- and options as well as relief from the burdens of a finan- conomic class. This may be likened to being expelled cially-strained life. They truly are immigrants to a new from the land of privilege. This risk gives rise to many of land, confronting new situations, expectations, demands, the stresses and anxieties reported by heirs. However, the responsibilities, and possibilities. Moreover, those who most prevalent circumstance is the preservation of the come to wealth in a public way are perceived as changed wealth class already achieved, a task known all too well people. Their place in their community may be disrupted to be difficult enough in itself. as other people rearrange their expectations to match both Following from this first difference between acquired reality and the stereotypes of “the Rich.” and inherited wealth, there is a second key distinction. Acquisition of wealth comes through two funda- For Inheritors raised with wealth, the wealth is present before mental types of journey, each of which has unique char- the individual. It exists in the environment, in the home, acteristics and psychological adjustments: and in the childhood circumstances enveloping the heir. Compared to acquirers where wealth comes after the • Through one’s own sustained effort, or establishment of identity, Inheritors begin life as new indi- • Through good fortune or a traumatic event, viduals within the background of Old Money. Young without personal effort. heirs know little of economic cultures other than the land of their birth. Their identity, therefore, is intricately tied Other factors influencing integration of wealth into to wealth throughout childhood development. Although personal identity include whether the wealth is acquired there are many benefits to this, there also are toxic ele- swiftly or slowly, the life stage at which it was largely ments. This then is “The Inheritor’s Dilemma”—the achieved, how many social classes are leapfrogged along daunting task of growing a strong responsible identity out the way, and the money personality style of the individual. of the environment of wealth. There are common challenges in the lives of people Financial Windfall by Effort who acquire or inherit wealth that must be resolved in order to live a productive and fulfilling life. The paths, how- Perhaps the most notable psychological benefit of ever, differ for acquirers and for Inheritors. They start from acquiring wealth through effort is that the wealth feels very different places and traverse very different landscapes. deserved. For some who achieve surprisingly great wealth, Advisors to the wealthy need to be familiar with each. the magnitude of the reward may be hard to accept. But for most who acquire wealth by effort, becoming rich is THE DILEMMAS OF ACQUIRED WEALTH at least the fruit of a good work ethic and therefore may feel justified emotionally. The wealth may feel fair in the God gave me my money. I believe the power to make sense that it is tied to self-responsibility, persistence through money is a gift from God, to be developed and used to time and adversity, and inherent talent. Wealth creation the best of our ability for the good of mankind. Having may be associated with the hallmarks of good psycho- been endowed with the gift I possess, I believe it is my logical traits in identity: resilience through hardship, ability duty to make money and still more money and to use the to delay gratification and work toward long-term goals, money I make for the good of my fellow man according intellectual grasp of how to deal with people or promote to the dictates of my conscience. creative talent, and what psychologists have identified as – John D. Rockefeller “self-efficacy” (Wood and Bandura [1989]), the sense of self-confidence and effectiveness some people have in get- The way by which you may get money almost without ting the job done. Integration of the monetary rewards exception leads downward. of hard work is easier for all these reasons, so the Acquir- – Henry David Thoreau er’s Dilemma for wealth creators is often less conflicted Acquiring wealth is both a psychological and soci- and more easily solved than for others. ological experience. When a person comes to wealth, Many successful wealth owners have time to adjust he or she experiences a shift from one social class and gradually to their increasing net worth over years, get- status to another. In the shift, these individuals are seen ting used to their new status as their success increases.

FALL 2007 THE JOURNAL OF WEALTH MANAGEMENT 3 There are predictable points, however, where Acquirers and privilege success bestows can create an confront the reality of their wealth such as retirement, unhealthy narcissism ... characterized by a craving liquidity events from business sale or succession, or cashing for attention and approval, a fixation with success in vested stock options. “Realizing” a capital gain in busi- and public recognition, and a lack of empathy for ness has both financial and psychological meaning at the others. If not understood, this dark side can threaten moment a signature is put to paper. First-person narra- the health of the business and the competence of tives often describe the remarkably emotional moment would-be successors.” (p. 1) when years of hard work, risk, and deprivation are finally transformed into wealth, leaving the business owner and At some point this destructive self-importance and spouse rich but lacking an outside identity, with the loss need for control leads to a disregard of the virtues and of social contacts, no place to go every day, overwhelm- emotions of people around the wealth creator, including ingly diverse investment decisions, and loss of purpose in family members. As we shall see later in the experiences life. Liquidity events are both heady and disorienting. of Inheritors, one of the more powerful forces acting A study by The Economist [2001] found a great within families of wealth may be narcissism embedded majority of families who had sold their business felt a sense within the parenting process. of something lost in the years after the sale. While these fam- Sports figures and celebrities A subcategory of those ilies realized greater wealth, they did so at the expense of who acquire wealth by effort includes those few but for- connection to the community and to rewarding work. In tunate athletes, artists, musicians, and other celebrities the end, many regretted the trade-off. Hughes [1999] also who achieve great success in their fields by talent and hard notes the sale of the family business can be traumatic for work. Unfortunately, the acquisition of wealth by tal- family members as it strikes at the core of the family’s iden- ented sports figures or celebrities often produces the tity and focus of energy. Anticipatory fear of this is fre- strained adjustment seen with working-class individuals quently behind the avoidance business owners display when with sudden wealth syndrome, lottery winners, and ben- facing succession planning or retirement. Furthermore, an eficiaries of financial settlements, overwhelming them increase in net worth when the family is already very rather than integrating with their personality. Professional wealthy may not bring a concurrent increase in well-being. athletes, for example, typically are young and naive, have At an individual level, the psychological makeup of few skills in financial literacy, are easy targets for scams and wealth creators is highly relevant both for their own per- pressures from family and friends, and don’t plan for what sonal adjustment and for the interpersonal dynamics in is normally a short career marked by frequent injury or first-generation families of wealth. Many founders and disability (Gersten, 2005; Reinhold, 2000). The positive owners of family businesses are entrepreneurs with cre- quality of exerting sustained effort to achieve riches is ative characteristics that affect every aspect of their lives. swamped by the many more powerful negative aspects of Many feel that success has come at least partly because of sudden (and often short-lived) wealth. For every successful their ability to keep things under their control. They tend Tiger Woods, Oprah Winfrey, or J.K. Rowlings whose to see success as not due to luck but to their own efforts. talent becomes a private industry with well-managed They may feel entitled to respect for their efforts and may wealth, there are multitudes of highly skilled celebrities be used to getting their way because of their wealth. Once and athletes who are unprepared for success in terms of they are successful, they are proud of the wealth they have money skills. created and want only the best for their families. Taken to an extreme, however, many controlling or Financial Windfall Without Effort: charismatic owners demonstrate a deep vein of self- Fortunate Events centeredness or narcissism, contributing to their success but making life difficult for their families (Lansberg [2000], Some people earn wealth through years of hard work Willis [2005]). As Lansberg [2000] notes, and sustained effort. Their wealth identity and adjustment benefit from the link forged between self-responsibility and “Narcissism is often a reason why entrepreneurs financial independence. For them, immigration to wealth choose to blaze their own trails. Once family busi- happens gradually but with direction by their own compass ness founders have succeeded, however, the stature and navigation by their own hand. In contrast, some people

4 ACQUIRERS’ AND INHERITORS’ DILEMMA FALL 2007 arrive at wealth relatively suddenly without having created in general: well-grounded personality, a prudent money the fortune themselves. Wealth acquired without one’s effort personality, and (often) spirituality. Absent these, how- may be easy in one sense, but it arrives without the useful ever, there is a high probability that the wealth will not connection between self-responsibility and success. be integrated with identity nor change important behav- A financial windfall can happen by several methods iors, leading to dissolution of the wealth. without one’s talent or entrepreneurial effort: A British study of lottery winners (MORI Study [1999]) found that over half of winners of more than £1 • Lottery winnings million stopped working upon becoming rich, yet their • Marriage or family member’s success perception of their social class was remarkably unchanged. • Straightforward inheritance. These millionaire winners still considered themselves to be working-class, down only slightly from the 60% self- These methods typically do not create the level of rated as working-class before the win. This supports the riches associated with multigenerational wealth. With the view that one’s identity remains largely intact for some exception of certain multimillion-dollar lottery winners, period of time despite new circumstances that no longer most recipients of financial windfalls achieve mass-affluent support that identity. In some ways the slowness to change ($500,000–$2 million) or high-net-worth ($2 million–$20 identity may be healthy, preserving a sense of continuity million) levels. Nevertheless, they represent an important in the self and defending against a disruption in self-image. segment of those who escape the socioeconomic cultures Yet it also fails to reflect the true change in social cir- of their birth to establish a foothold in the land of wealth. cumstances, new options, and family identity that come Lottery winners Studies of lottery winners reveal along with the wealth and which would require inte- complex interactions among several factors. These include grating one’s old identity with the new reality. the amount of the winnings; the income, race, and per- Family members and spouses Another category of sonality of the winner; and, most importantly, the level acquired wealth occurs when one is associated with the of financial skills possessed by the winner at the moment wealth creator but not directly involved in the wealth cre- of winning. Those who play the lottery tend to be dis- ation. This can occur in one’s primary relationship to the proportionately low-income, minority, male, and lacking wealth creator as in marriage or other committed rela- in education, although many middle-class people play the tionship, or as the parents or siblings in the family of origin. lottery on a less-intensive basis (Bradley [2000]; Clotefelter Many spouses who accompany the wealth creator and Cook [1989]; Clotefelter, Cook, Edell, and Moore through the long journey toward success feel a sense of [1999]). Lottery players tend to possess many distorted shared effort in the wealth creation, thereby experiencing behavioral finance beliefs, such as the gambler’s fallacy (if the same qualities of self-responsibility, work ethic, and fair you play long enough you can recover your losses because compensation that support the wealth creator’s own adjust- the odds favor a shift in events) or that gambling is the ment to becoming rich. Spouses’ participation takes many most effective way to achieve one’s retirement nest egg forms. They work other jobs to bring in income while the (Shefrin [2002]). family incubates a business. They care for the home and As a result of limited financial education and other children so the entrepreneur can focus on work. They lend factors, many who do wind up winning significant emotional support in a true partnership marriage. By con- amounts eventually lose their millions as they fall prey to tributing indirectly but meaningfully to the wealth cre- scams and lawsuits, get deluged with requests for loans ation, they then feel justified in sharing in the rewards. and gifts by family and friends, and endure the breakup Having a solid, frugal, and hard-working spouse whose of their primary relationships (Bradley [2000]; Goldbart values coordinate with the wealth creator has been found [2001]; Kaplan [1978]). However, the stereotype of the to be a significant predictor of achievement of high-net- disastrous lottery winner may not be completely accu- worth status (Stanley and Danko [1996]; Stanley [2000]). rate. Some authors have noted that many high-net-worth Adjustment can be more complicated for spouses lottery winners are able to maintain their winnings and or family members who are bystanders to the wealth live a better life than before (Bradley [2000]; Jones [2006]). acquisition. This can occur with second wives or hus- The keys to good adjustment after a lottery windfall appear bands, romantic relationships developed after the wealth to correlate with those necessary for wealth adjustment is in place, and siblings or parents. In essence, these people

FALL 2007 THE JOURNAL OF WEALTH MANAGEMENT 5 get to immigrate to at least some level of wealth virtually the family system including changes to children and grand- overnight. Emotional adjustment for those near the children, choices about estate planning, and entry into Acquirer can be complex. the world of trusts, charitable giving, and perhaps even Generosity toward parents, siblings, and friends is new purpose in later life. We explore the range of these both a common benefit and a frequent area of tension that adjustments in our discussion about Coming to Terms arises when acquiring significant wealth. Family mem- with Acquired Wealth (below). bers who are granted a share in another member’s suc- cess may struggle with a sense of guilt for not having Financial Windfall Without Effort: contributed to the bounty of the family. They may also Negative Events feel dependent on their benefactor for his largesse. This underlying sense of feeling “not deserving” may wear For a few individuals, wealth arrives as a by-product several faces. One may be a persistent sense of guilt, of an unwanted, often traumatic event. These immigrants embarrassment, or anxiety that detracts from enjoyment are distinguished by having been transported not only sud- of whatever wealth is shared (Domini, Pearne, and Rich denly but as a consolation prize for enduring something [1988]). The other, perhaps more toxic response, turns highly unfortunate. Common events include the following: the lack of deserving outward into a sense of entitlement, claiming ownership where none is due. Either way, those • Sudden or complicated bereavement. near the Acquirer endure a particularly strong dose of • Insurance settlement after injury. the biases many people believe about money bringing happiness. These biases incorporate the unique mixture Recipients of bad events mixed with good fortune of envy, resentment, admiration, and disdain with which experience a unique set of psychological stresses. Just as the world views the Rich, the “hostile envy” mentioned murder, death of a child, or death without recovering a by Bork [1998]. Without having worked hard to create body complicate normal mourning (Rando [1993]), the wealth, however, wealth’s immigrants-by-relation- receiving money through a traumatic event can severely ship must find ways to reconcile their good fortune with taint the windfall and alter the already-difficult adjust- their prior identity. ment to acquiring sudden wealth. The money may be so Straightforward inheritance Perhaps the most contaminated by the circumstances of its arrival that adjust- common method of acquiring wealth in midlife without ment may be significantly delayed or aborted altogether. having worked for it is via inheritance from someone in Moreover, the psychological disconnect between everyone the family system. The reader may question why this else’s pleasure at the money and one’s own angry confu- method doesn’t appear later in the section on inherited sion about it compounds the process. wealth, since inheritance is apparently the active process. Sudden or complicated bereavement Some inheri- We distinguish here those individuals who grew up in tances are strongly overshadowed by either the circum- working-class or middle-class homes, developing middle- stances of the death or the complexity of the relationship class identities and working for a living out of necessity with the donor during life. It is one thing to inherit money most of their lives until an inheritance comes to them in midlife from beloved grandparents. It is entirely different from the death of an aged parent, grandparent, or prover- to be thrust into simultaneous wealth and orphanhood at bial rich uncle. These Inheritors are not raised with wealth age 13 or 33 by the death of both parents in a plane crash, and so have much in common with others coming into or to experience the demise of multiple family members wealth suddenly or by no effort of their own. in a common accident or disaster. The death of a child If the relationship with the benefactor was loving, can result in a substantial litigation settlement or the pleasant, or simply innocuous, individuals receiving a sub- transfer to other family members of his/her beneficiary stantial inheritance in midlife may experience predomi- interest in a trust. The death of a wealthy or heavily- nantly positive reactions to their good fortune. Nevertheless, insured parent or spouse by violence or terrorism may be their journey toward acceptance of the wealth may have equally traumatic (see Feinberg [2003] for discussion of many aspects of sudden wealth syndrome with its compli- September 11th Victim Compensation Fund). In some cated emotional palette, detailed below. They will also instances, wealth may devolve to the deceased’s kin have to contend with the impact of their new status on through estate transfers that may not have been expected.

6 ACQUIRERS’ AND INHERITORS’ DILEMMA FALL 2007 Most painfully, money may accrue to a family member There are few large studies of the long-term psy- through litigation requiring extensive highly emotional chological adjustment of litigation settlement recipients. testimony and legal battles over what the death is worth In our experience, beneficiaries of financial settlements in dollars and cents. show several common patterns of emotional adjustment Another painful yet “enriching” bereavement occurs to the money. One group appears to accept the windfall when the relationship between the donor and beneficiary as the legal profession frames it: just compensation for was severely tainted during life. Not all inheritance rela- damages incurred. If the settlement is experienced as rea- tionships are loving, unambiguous, and emotionally sup- sonable, the money is accepted largely without hesitation portive. Benefiting financially from the death of a despised or ambivalence, even with a certain degree of pleasure or abusive relative may be highly complicated. It may feel for the reparation it represents. to some beneficiaries as reparation for what was endured A second group feels conflicted about the money, during life. For many others, the money only continues sometimes taking years to come to grips with what hap- a legacy of pain, harsh memories, and perception of the pened. They accept the money for the benefit it brings money as dirty and undeserved. Inheritance fights affected to their families and their lives, but they remain angry, by allegations of abuse are the stuff of literature (e.g., A embarrassed, or depressed, as if financial compensation Thousand Acres by Jane Smiley [1993], or a retelling of was granted but emotional reparation was not. For them, Shakespeare’s King Lear) and of well-publicized lawsuits the money is a perpetual reminder of the injury, keeping and countersuits in modern-day America. For example, it alive. Psychotherapy is of potential benefit for this group the third wife of Seward Johnson was left the bulk of his in helping resolve mixed feelings about the entire event, fortune after his death, and his children sued her (Margolick including the financial settlement. [1993]). The wife felt justified in receiving the money A third group essentially disowns and divests itself for her years of care for Seward. The children felt deprived of the money, either consciously or unconsciously. Mem- of their rightful inheritance and were aggrieved about bers of this group experience the same ambivalence about years of poor treatment by their father. A battle like this the money as the second group but appear to solve their leaves both sides scarred, creates scandal in the public, and distress by eliminating the money rather than tolerating casts a negative quality upon the wealth for both sides. it for the good of the family. This group loses the money Litigation settlement Some measure of wealth may not just through poor money skills, but through con- come with financial settlements after civil or employment flicted emotional adjustment. Either by gifting it to char- litigation. Causes of action may include medical mal- itable causes, spending it, or depleting it through loans practice, personal injury, work injury, physical and/or and gifts to friends and family, they demonstrate their psychological damages from sexual abuse, or workplace feelings of not deserving the money by getting rid of it. harassment. The ultimate amount to the injured party is These acquirers of at least modest wealth run from poten- typically diminished by the one-third that goes to the tial adjustment to it by returning to their more-familiar attorney and by any lifetime medical costs that rely on financial baseline. the funds remaining available. For the working-class or middle-class plaintiff, however, these are significant set- Factors in the Acquirer’s Dilemma tlements that provide not only compensation but a sub- stantial measure of new financial security. We have described how individuals come to wealth Since many plaintiffs in litigation cases are working- by a variety of routes, speeds, and vehicles, sometimes as class or middle-class individuals, management of the set- captains of the ship and sometimes as willing or unwit- tlement proceeds is—once again—largely dependent on ting passengers. Through whatever method of travel, these the personality and financial skills of the beneficiaries, immigrants bring with them the culture, values, history, who may be woefully unprepared for having large assets. language, and beliefs of the socioeconomic lands of their Those who can hold and grow the settlement with birth as they journey to the Land of Wealth. restraint benefit much more than those whose newfound The acquisition of wealth is often seen as an end savings are quickly turned into large screen TVs and in itself by those who struggle to get there, never thinking expensive vehicles. Prior money personality is the key deeply about what will happen at journey’s conclusion. factor here. Wealth acquisition does not complete personal development,

FALL 2007 THE JOURNAL OF WEALTH MANAGEMENT 7 however. It requires even more, since identity is chal- Wealth achieved at an earlier age brings a different lenged to incorporate the transition. Goldbart [2001] and set of stresses (Bradley [2000], Domini, Pearne, and Rich Twist [2003] noted, for example, how new questions of [1988], Goldbart [2001]). Identity is still fresh and forming, life purpose came to the fore in the lives of young tech- vulnerable to transformations good and bad. Seeking a nology millionaires. Having gained surprising wealth, the life partner and dealing with the rapid currents of rela- newly wealthy had to figure out how to live a life that tionships in one’s 20’s can be complicated by new stresses included their wealth in a positive way. Lives constricted brought on by wealth, power, and even fame. In later by work pressures were transformed in early retirement adulthood, wealth’s impact on relationships may be mit- to new purpose through philanthropy foundations and igated by greater maturity, generally achieved through the pursuits embracing deeper human meaning. Life’s choices experience of mature adult relationship skills. Yet for some are broader when one is rich, but the criteria for what a young millionaires, the plasticity of youth allows the adjust- person should do, and what will motivate one’s actions, ment to flow more smoothly. are more elusive. Cross-class transition Rising by more than one The Acquirer’s Dilemma is essentially the set of socioeconomic class produces at least some measure of choices faced by all immigrants: whether and how much disorientation. There is a forced shift in identity, and to assimilate. One may wish to fit into wealth’s desirable there may be only a partial adoption of upper-class cul- characteristics of comfort, security, prestige, indepen- tural norms and attitudes. Lubrano [2003] eloquently dence, and freedom. One may also wish to avoid the more describes his transition from working-class Brooklyn to undesirable attributes of the culture: snobbery, entitle- white-collar Philadelphia life by way of Columbia Uni- ment, superficiality, temptation by ready vices, and dis- versity. He writes that the “sense that I comprise two connection from responsibility. We explore the stresses people who aren’t always compatible never left me” (p. 1). that face the newly rich as they attempt to integrate their His term for individuals who cross multiple economic identity as outsiders with the reality of their new sur- class levels is “Straddlers.” These are individuals who, like roundings in the culture of wealth. This psychological himself, grew up and still maintain one foot in the world adjustment depends on many factors. These include one’s of their family while the other foot is firmly planted in age, the number of social classes skipped on the way to a newly-acquired world of greater wealth and position. success, pre-existing money personality, and the speed of This is analogous to the phenomenon of “third culture wealth acquisition. kids” (Pollock and Van Reken [2001]), where missionary- Stage of life Acquired wealth is very different at age family children born in one culture grow up in a second, 55 than at 25. Both require integration of the fortune foreign culture, never feeling wholly one or the other into one’s personality, but personality at 55 is more estab- but rather an amalgamation of the two. Echoing this sense lished and grounded in experience than is the case during of being Both yet Neither, Lubrano advises, “ideally, a the formative years of young adulthood. High-net-worth Straddler becomes bicultural: Understand what made individuals in middle age tend to be more conservative, you who you are, then learn to navigate the new cautious, risk-averse, savings-aware, altruistic, and phil- setting” (p. 193). anthropic, often with a history of more stable family life Narratives by individuals achieving great wealth and greater life satisfaction and spirituality. Having nur- mention these themes (Blouin and Gibson [1995]; tured qualities of restraint, frustration tolerance, self- Schervish, Coutsakis, and Lewis [1994]). Psychological efficacy, and delay of gratification, these “millionaires next adjustment to acquired wealth involves “passing” as a door” (Stanley and Danko [1996], Stanley [2000]) in fact native in a world where everyday language contains coded constitute the majority of wealthy individuals in America. references to places and terms that are known intimately Their primary concerns are preserving their identity as by those born into the good life, but obscure to those on middle-class individuals despite their wealth, avoiding the outside. This leads to feeling like the imposter in contamination of their children’s development from the some settings, with constant anxiety that one may be money, and protecting their assets from taxes, disability, publicly —embarrassingly—discovered. Dressing correctly disaster, and/or dissolution upon death. Their personal and behaving well at a New York philanthropic gala is an identities may remain remarkably untouched by their tran- adventure in culture shock for a newly-minted multi- sition to wealth. millionaire from the Midwest.

8 ACQUIRERS’ AND INHERITORS’ DILEMMA FALL 2007 A common sentiment voiced by individuals with Reviewing the symptoms of sudden wealth syndrome acquired wealth is, “this is not me.” They may have worked reveals much in common with grief responses, including hard to achieve security, independence, and freedom from a sense of vulnerability, a need for security, and a realiza- worry. Yet, it is hard to feel totally comfortable alongside tion that one’s world has changed in ways not entirely “the rich folks” they once envied or disdained. They also expected or desired. cannot quite go back to their roots. With even minimal Sudden wealth syndrome complicates the already time to adjust, economic Straddlers find themselves no challenging nature of wealth adjustment (Domini, longer fitting in comfortably with their old friends and Pearne, and Rich [1988]). The syndrome is unexpected activities. Even if they themselves feel comfortable, they as well as counterintuitive for most people of moderate may encounter the unearned resentments, jealousies, or means. Anthes and Lee [2002] noted, “The real, often adoration of the Rich still held by their old friends (Bork deeply disturbing sense of loss that many people feel [1998]; Bronfman [1987]). Straddlers returning to the old [becoming rich] goes counter to the common view of neighborhood may have to endure the stereotypes of the a financial windfall—that it is a gain.” (p. 84). Since the wealthy they once endorsed themselves. achievement of great wealth is almost universally glo- Pace of transition Change in identity necessitated rified, opening up about one’s sudden wealth syndrome by wealth acquisition is normal. But, like any major often meets with incredulity on the part of the general change, it requires loss of what was and development of public. Individuals experiencing the angst of sudden a new identity that incorporates new information, new wealth are considered as either inherently neurotic or circumstances, and rearrangement of life options. The whiners over their good fortune (see Dunleavy [2004]). disorientation engendered by acquired wealth is particu- This compounds the problem by removing any sense larly severe when the transition is both large and rapid. of empathy for the individual or for the validity of his The identification of sudden wealth syndrome, coined reaction. Individuals struggling with their wealth adjust- by Susan Bradley, Stephen Goldbart, Joan Difuria, and ment often hide the extent of their symptoms lest they others during the dot-com era (Bradley [2000]; Goldbart be ridiculed by family and friends. It was partly through [2001]; Goldbart, Jaffe, and Difuria [2004]) was an impor- recognition of the validity of sudden wealth syndrome tant step in characterizing a set of reactions and behav- that the field of wealth counseling began to achieve iors experienced by the newly rich. They noted that the some acceptance and a place in the field of psy- experience of suddenly having more wealth than one chotherapy. had ever dreamed of was more unsettling than satisfying. A predictor of adjustment to wealth acquired sud- It created ambivalence, guilt, and anxiety rather than denly or slowly is the individual’s prior money person- pleasure. ality, those money beliefs developed throughout These pioneers in wealth counseling identified a childhood that crystallize in adulthood into one’s spe- constellation of symptoms that, like any psychological cific capacity for risk, the relative balance of saving and disorder, can occur along a spectrum from mild to severe: spending, and the level of trust in one’s own skills or in advisors (Kinder [1998]; Gallo and Gallo [2002]; Collins • Anxiety, insomnia, obsessive rumination over [2000]; Mellan [1994]; Mellan and Christie [2001]; money issues. Gurney [1988/2005]). Some money personalities are • Excessive guilt, with questioning of the fairness of psychologically healthier than others (e.g., Money Master the event. Profile, see Gurney [1988/2005]). They are also more • Fears of loss of control. predictive of adjustment to greater wealth, compared to • Suspicion toward relationships and potential personalities plagued by anxiety, guilt, desire for power, exploitation or hurt by others. or perfectionism. • Depression, with lack of pleasure in activities and Eileen Gallo, a psychotherapist who has written inability to derive pleasure from the money. extensively about wealth adjustment, (Gallo [2001]; Gallo • Identity confusion. and Gallo [2002]; Gallo and Gallo [2005]), notes many • Impulsivity in spending. acquirers of sudden wealth do make a reasonable adjust- • Paralysis over decision-making and uncharacter- ment to their new circumstances. In her study of the istic passivity regarding money management. suddenly wealthy (Gallo [2001]), she found

FALL 2007 THE JOURNAL OF WEALTH MANAGEMENT 9 “...a significant relationship between early money experience of not having been wealthy may never be messages and adaptation to sudden wealth. Eighty- understood by their children. How, then, to pass on pos- eight percent of the participants rated “positive” [in itive values and the motivation for work and success to adjustment] were raised in households in which the the next generation? childhood money messages were either “save/don’t In the following section, we examine the challenges spend,” “save” or “save/spend responsibly.” Sixty- of those who are raised with wealth. We will look at the seven percent of the participants rated “negative” generational stresses that occur as Acquirers attempt what did not receive these while growing up.” every first-generation immigrant parents know to be dif- ficult yet eminently important: raising native-born chil- She correlated better outcome of sudden wealth dren with the values, culture, and beliefs of the Old syndrome with pre-existing money personalities that Country. This clash not only of generations but of cul- included financial literacy and balanced money attitudes. tures characterizes the stresses experienced by the second This is echoed by studies of lottery winners (Bradley generation of wealth. We believe such clashes frequently [2000]; Gaming Magazine [2001]; Kaplan [1978]; Jones precipitate transition failures, eventually leading to wealth [2006]) where money personality is a key variable in the destruction in the generations that follow. We also sum- adjustment: “You can catapult people from one economic marize the literature that speaks to preventing these fail- status to another overnight, but a lifetime of beliefs and ures of heritage so that the promise of wealth can be experiences changes more slowly” (H. Kaplan, cited in preserved over time. Gaming Magazine [2001]).

THE DILEMMAS OF INHERITED WEALTH Coming to Terms with New Wealth: Resolving the Acquirer’s Dilemma Wealth is a responsibility and the sharing of it a way of life. – Peter Haas, Jr. (Member, Forbes 400) The acquisition of wealth is a unique experience in an individual’s life. Those who come to wealth make a Our incomes are like our shoes; if too small, they gall and journey that many envy and only a few accomplish. We pinch us; but if too large, they cause us to stumble and trip. have seen that Acquirers must become comfortable with – Charles Caleb Colton the presence of great wealth by managing both the cultural Some people’s money is merited, and other people’s is and internal identity shifts brought on by the transition inherited. to wealth. This requires integration of new information – Ogden Nash and a broadening of identity to include new realities. Resolving the dilemmas of acquired wealth is more Inherited wealth offers many things: opportunity, complex than society typically understands or accepts. leisure activities, travel, social status, power, and inordi- Acquirers often have little sympathetic assistance in their nate influence for the benefit of other people. Like being task, as they consider it embarrassing or socially unac- born with great beauty, it can automatically make someone ceptable to feel conflicted. Through supportive friends, special without their ever having done anything to earn competent therapists, or peers in similar circumstances, it. However, as we consider the research and personal they may be able to adjust their self-conceptions to inte- accounts of people who inherit wealth, we learn that grate their new status. At the center of the process can be wealth is far from an unmixed blessing. The presence of the person most connected to both the wealth and the money from birth appears to create certain common individual: the thoughtful and trusted advisor. By under- dilemmas in growth and development of Inheritors as standing the many facets of wealth acquisition and adjust- well as add to the normal developmental journey every ment, the skilled financial advisor can help the client as person must navigate. a whole person and individualize the client relationship. Researcher John Levy [1986] envisioned the There is yet another phase, however, to integration common problems experienced by young heirs as resulting with wealth. After establishing a new personal identity, from the intersection of two sets of issues: the ambivalent those Acquirers who are parents must add a second element: attitudes toward wealthy people in society and common concern for what life will be for their children. Their patterns in how wealthy families raise their children. We

10 ACQUIRERS’ AND INHERITORS’ DILEMMA FALL 2007 already commented on the biases about wealthy people that additional issue is the inherent challenge of finding life society accepts as normal: the class- and culturally-driven purpose when one’s life is financially set. stereotypes termed “wealthism” by Bronfman [1987] and The professional and personal literature of the past others. Wealthism is an issue for both the acquired-wealth 30 years has made great strides in our understanding of population and the inherited-wealth population. It may Inheritors’ developmental stresses as well as the damage be argued that wealthism affects Inheritors more acutely, that can occur in trying to create a fulfilling, emotionally since they have no prior non-wealth identity to help offset successful, and productive adult life. In recent years, with the stereotyping. Young Inheritors are handed the labels the marked increase in people acquiring and inheriting of wealthism from Day One, making them vulnerable to wealth, there are now more resources available than ever accepting the labels as true in a way that grown-up wealth for people who are experiencing these dilemmas. For Acquirers can resist. those able to solve this unique task of maturation, the The omnipresence of wealth during upbringing has potentially crushing strength of great wealth is tamed and a secondary effect not experienced by individuals who come harnessed into service for both the individual and society. to wealth as adults. Multi-generational wealth often creates influences on parenting that have unintended effects on THE DEVELOPMENTAL EXPERIENCE child development. These child-rearing behaviors can make OF INHERITORS it difficult for children to mature emotionally, to experi- ence a sense of efficacy and self-worth, to feel positively A core theme in the literature on inheriting wealth connected to others, and to develop fulfilling work. Growing is that a personal struggle often takes place within each up very wealthy can delay or retard the process of maturing, person raised with substantial wealth. Each individual sometimes preserving dependency long into adulthood. must come to terms in his or her life with the mixed blessing of wealth. For example, one may have to recon- Developing Wealth Identity: cile a sense of entitlement about money with the opposing The Inheritor’s Dilemma belief that extreme riches put one in debt to the world. Reconciling opposites, however, is never easy. Some heirs Compared to incorporating new wealth into an succeed and come to live good, fulfilling, and effective already-formed identity (The Acquirer’s Dilemma), Inher- lives, while others simply fail to thrive, caught up in itors raised with wealth have a different task. The psychology destructive relationships and dysfunctional behavior. Some and sociology of inherited wealth conspire to produce initially struggle but are able to achieve positive balance the Inheritor’s Dilemma: how to create an effective individual later on through difficult and painful learning. Each indi- identity strong enough to separate from, yet integrate vidual must ultimately understand the value of living a with, the massive power of wealth itself. Continuing our meaningful life, and discover how to use one’s personal metaphor of the Acquirer as the immigrant to wealth, we resources to do so. view the Inheritor as the native-born citizen of the land What causes this internal struggle to occur? First of of comfort and exemption from financial worry. The heir all, upper-class parenting is heavily influenced by the grows up surrounded by the language, activities, attitudes, source of the parents’ wealth. Each type of acquired wealth and unconscious beliefs that infuse upper-class culture. leads parents to communicate certain messages about The Inheritor must still accomplish the task of any indi- money to their children, and to have different expecta- vidual: to grow a productive, responsible, and well-adjusted tions about how the next generation will use its wealth. identity within the environment of one’s birth. What is Indeed, a source of great concern for parents with acquired under-rated is how difficult it can be to grow this iden- wealth is how to raise responsible children who are happy tity when the land of one’s birth is Wealth. The very and productive. Yet families with new fortunes lack a tra- nature of the environment makes this growth a uniquely dition of how children are raised with wealth and how daunting task. wealth is passed on. A family with recently-acquired As we shall see, for Inheritors there are many chal- wealth may therefore treat its children differently than a lenges of wealth. These range from the heavy weight of family that has had wealth for generations. unhealthy parenting practices to the mixed messages about Many newly-rich parents feel caught between the wealth that are given by both parents and society. An fear that wealth will harm their kids and a desire to give

FALL 2007 THE JOURNAL OF WEALTH MANAGEMENT 11 their kids the best. They may see their wealth as an obstacle research. As we noted in the section on Acquired Wealth, rather than an asset in this task. This ambivalence may con- the busy lives of the wealth creators may, at the very least, fuse their children and lead to contradictory messages about simply leave little time for children, giving the appear- wealth. Schervish [1995] aptly describes this dilemma: ance of self-centeredness to the detriment of the child. Children may respond to the emotional depriva- “Especially for the entrepreneurial wealthy—but tions of narcissism in several ways. They can take on sim- for those with family wealth as well—the quandary ilar qualities in their own lives, expressing arrogance, is how to teach their children the responsibilities entitlement, and insensitivity to others. Alternatively, they of wealth while also providing for their needs. can feel chronically impaired and unprepared for their Having gone through hard times, they do not want lives and conflicted about their wealth. Either outcome their children to face the same insecurities. As a produces many of the behaviors society associates with result, they furnish a life of affluence for their chil- the dysfunctional Rich. dren while at the same time attempting to instill fru- The next wave of research about the psychological gality, humility, and responsibility. ... the problem development of heirs occurred in a series of studies in the is that once he chose an affluent neighborhood in 1980s, greatly advancing our understanding of the expe- which to live, his children automatically became rience of inherited wealth. One of the first was John exposed to an environment that threatens to make Sedgwick [1985], a wealthy Harvard graduate who inter- them materialistic” (p. 115). viewed 75 Old Money heirs. His respondents reported their money was often a surprise, handled by intermedi- Second, powerful forces operate inside the family aries and never discussed in their family. To a person, they systems of multigenerational wealth and affect the growth were unprepared for the future, neither warned nor guided and identity of Inheritors. Despite the envy of those into their situations. Trust officers made them feel sub- peeking into gated communities and stealing glimpses servient, and heirs had not learned to handle their affairs into the lives of the rich and famous, growing up within independently: “Trusts are rich kids’ equivalent of the an ultra-wealthy family has a very definite downside. welfare office. The trust officers are the good cops; trustees These forces range from the personalities of the parents are the bad cops. This secrecy and lack of knowledge and to the cloistered and sometimes oppressive nature of preparedness helps build real passivity into their nature,” exceedingly good fortune. [p. 52] noted Sedgwick. He continued: The earliest research on parenting wealthy children came from psychoanalytical therapists (Stone [1972]; “For all rich kids, the act of inheritance is entirely Grinker [1978]) who reported that wealthy children often passive. Yet this sometimes makes the guilt more grow up in an environment where parents are largely severe, and more permanent. True criminals, at absent or neglectful. Stone and Kestenbaum [1974], least, have something to confess. They can receive studying 15 wealthy young adults, noted that maternal forgiveness, they can reform, they can put their deprivation was the one common factor in their devel- sins behind them. But rich kids start to feel they opment, affecting normal processes of attachment and a are the sin themselves, and every crime that was firm foundation for security in the world. These studies ever committed out of greed now hangs on their postulated that, to a greater degree than in middle-class heads. They see the inequity that lies about them, families, the wealth population may contain a higher base or read about it in their money mail, and they think rate of people who can be described as narcissistic— they are responsible for it. Because they are on top, exhibiting the self-absorption and self-involvement that they must be squashing those on the bottom. This deprives other people of attention or emotional space. is the true embarrassment of riches....To clear them- Recall from our previous discussion of wealth cre- selves they often feel...an unspecified and diffuse ators that the narcissist has difficulty realizing the needs need to do penance, to suffer in some way so as to and uniqueness of other people, which impacts family life square things with the almighty dollar.” (p.106–7) and ultimately the raising of children. Whether narcis- sism precedes or is an effect of wealth is not completely “A lot of rich people I know don’t know what they clear, and may be a matter for extensive debate and want. That’s the biggest curse of the wealthy. A

12 ACQUIRERS’ AND INHERITORS’ DILEMMA FALL 2007 gauge of how much you want something is how 2. Parents using money to control their children. Wealthy hard you’ll strive for it. If you work for your parents may be used to being in control and having money, then you know how much your money is other people listen to them. They may use money worth.” (p. 83) to control others not only at work but at home. This habitual style may sow the seeds of rebellion, John Levy [1986] interviewed 30 heirs as well as passivity, or self-destructive behavior in some heirs several psychologists and wealth advisors in a research who may later recreate similar relationships with project sponsored by a family foundation. Like others in their partners. Parents reward “proper” behavior, the field, Levy uncovered several aspects in the develop- and the spoken or unspoken threat to cut children ment of wealthy young people: off from the family money can have a chilling effect. Threats by working-class or middle-class parents to • Inheritors are often delayed in their emotional devel- disinherit a disobedient child carry little weight, so opment, lack adequate motivation, and have diffi- those parents must use a broad range of methods to culty with self-discipline. express anger or extract compliance with their • Self-esteem is often inadequate and many Inheri- wishes. Wealthy parents can not only use this threat, tors are bored with their lives. they may need no other. This control often extends • Many have difficulty using power effectively. not just to daily behavior but to schools, careers, • Inheritors often suffer from guilt and alienation. mates, and other life choices. Arenas where Inher- • Suspiciousness is almost inevitable. itors can exercise their own will may be much more • Male and female Inheritors face different problems. limited compared to the experience of children from non-wealthy families. Furthermore, this may create These themes were confirmed and further delin- a reverberating pattern of intergenerational conflict: eated by one of the more remarkable explorations of the parents over-control their children’s choices and impact of inherited wealth, a study by wealth consultant then later bemoan their offspring’s lack of initiative, Joanie Bronfman [1987]. Interviewing nearly 100 heirs decision-making skills, and ability to take risk. Some for her doctoral dissertation, Bronfman provided a rare children get worn down by this, while others choose portrait of the lifestyle and experience of wealthy people, to rebel in self-defeating ways. along with their struggle to develop comfort and satisfac- 3. Family isolation and distrust. The wealthy family may tion with their money and their lives. Her dissertation and see itself as inherently special and may distrust others similar accounts by others in the past 20 years illuminate whom they fear will take advantage of them. Chil- several common stresses in multigenerational wealth: dren hear messages that lead them to distrust others. Given society’s attitudes toward the wealthy, there 1. Lack of intimacy and contact with parents. Parents are is some validity to this suspicion. However, taking busy—with their business, social events, traveling— on this blanket suspicion affects young people by and don’t have much time for their children. They inculcating a generalized distrust of others without delegate child rearing to servants and caretakers of teaching the social skills for trusting others or for mixed levels of warmth, competence, and caring. taking care of themselves in relationships. How can To deal with their guilt, parents may shower their heirs really know if a person cares about them for children with “things” to supplement the deficiency who they are? Sedgwick, Levy, and Bronfman dis- in contact. Added to that, caretakers may come and cuss the often-elaborate defenses and schemes heirs go, so that young people may learn to embrace use to discover the true feelings of friends, lovers, money as a source of nurturing. They grow to resent and acquaintances, while trying to manage their the lack of contact with their parents and to feel deep feelings about being exploited and taken advan- entitled to material possessions as substitutes for what tage of. they didn’t get within the family. Many of Bronf- Very wealthy children also keep to themselves. man’s respondents spoke about feeling like “poor Raised in large estates, they may have few other little rich kids” and longed for a more normal, less children to play with and may be kept to a very privileged life. small circle of family and friends. Like members of

FALL 2007 THE JOURNAL OF WEALTH MANAGEMENT 13 a royal family, wealthy children go to exclusive come into their inheritance until they are well into schools or are tutored at home, and have few peers adulthood. The most common methods of estate to play with. Gibson, Blouin, and Kiersted [1994] planning have trusts in which an heir gains control present the reflections of one man who recalled, in stages, ranging from the early 20s to much later in life. An irony, therefore, is that many heirs live “…I’ve always felt… there was a fence around my with the implication of great wealth but in reality world. For several years, I lived with my grand- have only limited access to it. parents. Their mansion had a fence around it and 5. Dependency and lack of knowledge. Many wealthy fam- a gate. The servants were always watching because ilies tend to be secretive about their wealth. It is my grandmother had been shot at. So they weren’t considered vulgar to discuss money openly. Hence, about to let any tasty little heirs run around where it is something of a mystery to youngsters, who feel they might be grabbed. I was not allowed to go they cannot ask questions about this taboo subject. anywhere without a servant or a family member in By avoiding communication, families fail to pre- tow. (p. 4)” pare or inform their offspring about the demands, pressures, responsibilities, and potential power of Twist [2003, p. 57] noted that “excess money often their inheritance. Later, the convenience of a trust creates conditions of entitlement and isolation that fund may take away the necessity to understand or diminish one’s access to the genuine wealth of do basic financial tasks. This is especially common human connection and interaction.” Recollections in women, who may not be expected to become of the Dupont (Mosley [1980]); Rockefeller wealth producers. The lack of financial skills and (Collier and Horowitz [1976]); Mellon (Koskoff awareness can lead heirs to feel inadequate, con- [1978]); and Vanderbilt (Vanderbilt [1979]) families fused, and afraid in relation to their money. They include growing up with few playmates (other than are unprepared to deal with the money they inherit family), and living and playing within a family com- and may feel dependent upon advisors whom they pound in great luxury but without much contact fear, resent, or distrust. They also delay or neglect with ordinary people. Children’s isolation may be to develop basic life skills, including working and fueled by the fears of kidnapping and related secu- taking care of themselves. Heirs can be both priv- rity concerns. All of this can lead to confusion and ileged and impaired as they remain “children” far lack of certain social skills—where a wealthy person into adulthood. is automatically suspicious of other people, yet fails 6. Confusion about career and life purpose. Coming from to develop the ordinary social defenses against crit- wealth and expecting to inherit it can dampen a icism, ridicule, and bullying. young person’s motivation to earn a living or think 4. Entitlement amid luxury. Young affluent children live about a career. Many heirs find it hard to develop in a world of plenty with little sense of where things interests or sustain involvements. They don’t know come from, what they are worth, or how they come what they want in their lives, and they are con- to be there. Coles [1977] coined the term “entitle- fused about the very notions of career and life ment” for the expectation that the world will always involvement. In the face of so much money, they provide heirs with the very best. Inheritors grow are not sure what to do in their lives or how to up with a lifestyle that they expect to continue, often develop the motivation to stick to something. with no idea of how (other than inheritance) they While the wealthy person is essentially defined by might sustain such a lifestyle. Deep down, they fre- having the enviable choice whether or not to work quently feel anxious about what would happen if for money, this may not have an entirely positive the money went away. effect. Without an inherent economic motivation Interestingly, an important factor for Inheritors is to stick to anything or to sustain focus, heirs may the disparity between their own expectation of drift untethered through their lives. Many wealthy wealth, society’s view of them as wealthy, and the people have an extended late adolescence, degree to which they actually are in control of any embarking on endless journeys to discover real wealth. In various ways, many Inheritors do not themselves.

14 ACQUIRERS’ AND INHERITORS’ DILEMMA FALL 2007 7. Anxiety about fulfilling the family legacy. Inheritors A recent video documentary, Born Rich (Johnson may feel dominated and stifled by the legacy sur- [2003]), updates and explores many of these same themes, rounding their money. A family’s tradition around with somewhat more emphasis on the entitlement and wealth can come across as a deep and limiting set lack of personal focus of very wealthy young adults. The of obligations. For some heirs the magnitude of viewer gets the clear sense these heirs are very attached their parents’ success makes it difficult for them to to their money yet are finding it difficult to develop a per- do anything of significance. Others may feel pres- sonal identity on their own, even as they express feelings sured to follow a certain career path or participa- of unfairness and other negative aspects of their riches. tion in a family business. It may not be permissible They are plainly struggling through a difficult stage of to choose alternate ways of making a difference in self-development. Jamie Johnson, the director and cam- the world. Instead of being an individual, heirs may eraman, reveals his own struggle to come to terms with feel an oppressive obligation to act properly as part his wealth. At the other extreme of videography are of the family and to live up to the family name, reality shows such as the notorious The Simple Life with even if they are less than clear about just what this Paris Hilton, which reinforces the caricature of arro- means. One person in the Schervish [1995] study gance, irresponsibility, and cluelessness among wealthy mentioned that, as the heir to a family fortune, he heirs. lived in continual fear he would do something to The dilemmas of inherited wealth also may be lose the money, which in turn led him to avoid any affected by gender, though social norms and parenting behavior that could be risky or controversial. Col- attitudes may finally be changing over time. Schervish lier and Horowitz [1976], in their multi-genera- and Herman [1988] commented that: tional biography of the Rockefeller family, document this feeling among the fourth-genera- “This experience of being excluded from the rites tion heirs carrying the family name. The Rocke- and knowledge of initiation into productive wealth fellers bore a burden of carrying on a family is primarily ... characteristic of women... The tradition—a fear of disgracing the family—that led traditional responsibilities of these women have them to feel constrained or controlled by their focused on the maintenance of the upper class... legacy. [F]or these women, alignment is a limited and imposed one consisting of a position that focused Other researchers of inherited wealth have con- on the distribution and consumption of wealth firmed these themes. Blouin, Gibson, and Kiersted rather than its production.” (p. 77) [1995] of The Inheritance Project present edited tran- scripts of 17 interviews with heirs. These underscore In addition to Bronfman [1987], other dissertations the difficulty of overcoming a culture of isolation and that included interviews with female heirs echo themes of coming to terms with shame and guilt. The authors emotional conflict and ambivalence in coming to terms conclude that with inherited wealth (Frankfort [2002]; Burka [1985]; Freeman [2004]; Grossman [1989]; Holub [1987]; Kristal “...abundant wealth has a way of separating heirs [1991]; Levinson [1985]). Men may find the Inheritor’s from the grist of life. For some Inheritors, this sep- Dilemma easier to negotiate than women who, having aration manifests as a painful inability to identify been treated with more paternalism and devaluation, may their real needs and longings. More than anything, feel cut off from both control and participation in their such heirs are searching for ways to bridge the dis- wealth: tance they feel from themselves. Other heirs find it difficult to establish authentic and trusting friend- “Men are taught a broader vocation of being ships; they worry that perhaps their net worth mat- wealthy and are trained to fulfill a wider range of ters more to friends than their self-worth. Still responsibilities and expectations associated with others find it hard to connect with meaningful their wealth. From an early age, such men are work, often not knowing how to take the first step groomed to assume positions of leadership” toward developing a gratifying vision (p. 1).” (Schervish and Herman [1988, pp. 107]).

FALL 2007 THE JOURNAL OF WEALTH MANAGEMENT 15 Burka [1985], studying 15 young people who inher- tain romantic view of the reformed rebel who eventually ited significant wealth before age 35, found that all had takes over leadership. Unfortunately, some young men to overcome significant personal difficulties on the road never recover from rebellion and fall into self-destruc- to a positive identity, but that the males had an easier time tiveness. Grossinger [1997] has written a moving account than females. Frankfort [2002] interviewed six wealthy of his struggle toward growth and development, counter- young women, finding that money was often used to pointed with that of his equally talented brother who was exercise control over them within their families and had never able to recover from the wounds of his childhood. a profound effect on their development of personal The traditional journey of male heirs is often framed identity. Kristal [1991], studying 40 wealthy people—half as moving into a role similar to one’s father, either by self-made Acquirers and half Inheritors—found that the profession (politics, investment banking) or into the family self-made group had higher levels of self-control, achieve- business that is the source of the wealth. This progression ment, and motivation, and lower distrust in relation to contains the foundation for a positive developmental path, money. Across groups, women tended to feel more con- though many challenges must still be faced. The second- fused and uncomfortable with the power and status that generation business heir must develop a sense of steward- money grants, while men were often expected to continue ship over the family’s assets and gain true competence in to produce wealth. Female heirs more often feel empty, a world that tends to defer to the wealthy. He also must disenfranchised, or detached from control and connec- come to terms with a powerful Dad, developing legiti- tion to their money. Their journey to develop a positive macy in his own right. The entrepreneurial father is an wealth identity may be fraught with greater conflict or extremely strong figure, both in growing the family’s fewer guides. wealth and in shaping the family’s children. A traditional The personal accounts of wealthy businesswomen entrepreneurial father may want his sons to be like him, overcoming adversity support these findings. Novelist not understanding that part of becoming entrepreneurial Sallie Bingham [1989], the eldest daughter in a Southern is striking out on one’s own. The father may misinterpret family media empire, achieved notoriety when her father a son’s desire to go his own way as a personal affront, only suddenly sold their businesses out from under her and her to end up limiting the son’s potential to develop the desired brother, who were in conflict around buying out her traits of independence and creativity. Some fathers create share. After being fired from the board by her family, she compliant, uninformed heirs who will do anything to went public with revelations about growing up female in please them. Tom Watson Jr. of IBM [1990] wrote in his a family of wealth weighed down by excessive constraint autobiography of the brutal and demanding treatment he and WASP values. Raised to ignore her feelings and taught received from his father, leading to his lifelong quest to that, as a woman, she had little contribute, she writes prove himself worthy. movingly about the damage dealt to her self-esteem and Many entrepreneurial fathers do not know how to her efforts to make a place for herself in the world. create successors and are somewhat ambivalent about suc- Similarly, Katherine Graham [1997] was the lineal cessors in any case. For every heir that worshipped his heir to the Washington Post, the renowned newspaper father, there is also one John D. Rockefeller Jr., who built largely by her father. When her husband, organiza- moved his family from infamy and the oil business to an tional heir-apparent to the newspaper, committed investment and philanthropic orientation that continues suicide, Graham refused conventional advice to sell the three generations later; one Edsel Ford, who was pum- newspaper empire. She instead took over as CEO, ulti- meled and degraded by his father and met an early death mately growing the business into an even more renowned, from illness; and one Howard Hughes, who toiled self- profitable, and politically influential corporation. Her destructively to outshine the ghost of his father. story of overcoming obstacles describes the lack of prepa- Fortunately, differences between male and female ration, deep and formidable self-doubt, and social disap- Inheritors may no longer be quite as great as when some proval she had to face being an heir, not just to wealth, of these studies and personal accounts were written. The but to the more substantial personal strengths of power, past decade has seen significant changes, whereby young purpose, and identity. women are becoming more confident, assertive, educated, Men may have a broader range of socially acceptable and trusted as well as less pressured into traditional roles. choices during young adulthood than women, with a cer- Increasingly, women are taking on more positions as suc-

16 ACQUIRERS’ AND INHERITORS’ DILEMMA FALL 2007 cessors in family business, family offices, and in family what it is and how it works) or “pain” (where the con- leadership. The rebalancing of gender roles in society sequences of money decisions or awareness creates mostly appears to be impacting the world of wealth as well. negative reactions and behaviors in life). As individuals Male or female, the second—or third-generation progress first toward basic knowledge of money matters, heir has many ways to fail or succeed, though not in the then toward true understanding of financial principles and entrepreneurial way that most founders do. Ultimately, the capacity to persevere to achieve goals, they may the reality is that heirs grow up not in an easier world but ultimately develop a vision of how money can integrate a different world. They do not have to make it on their into their lives. Mastery of one’s relationship to money is own financially, but they must rise to the challenge of therefore a reflection of one’s personal maturity and an navigating a family and business world already populated increasingly sophisticated grasp of money values and with a diverse and colorful cast. They will fail if they don’t power. Sadly, the very wealthy often are stuck in inno- develop the skills, sensitivity, and personal identity needed cence or embroiled in pain, with remarkably little true to balance the existing demands with their own contri- knowledge or understanding to accompany their riches. bution. They succeed if they have a solid foundation in What, then, makes the difference between heirs personality, intelligent financial skills, and good supports who are able to find a place in the world and those who for leadership in adulthood. stumble? While not all responsibility can be heaped on parents, it does appear that the conscious involvement of Preventive Medicine—Raising Responsible parents in raising children with wealth is a critical factor Children with Wealth in the degree of turmoil the inheritor feels about his or her wealth. Several influential books (Hausner [1990; It is clear that Inheritors—natives born into the land updated in 2005]; Gallo and Gallo [2002]; Godfrey, of wealth—face risk in their personal development because [2003]; Hughes [2004]; Willis [2003]) describe how to of many factors. The bounty of their birth puts them at keep kids from being spoiled and/or dependent, and how risk for a syndrome of maladjustment that may last well to help develop a sense of compassion, work ethic, and into adulthood. Unless steps are taken to prevent this syn- positive identity. They offer several common messages drome or resolve it once it has developed, Inheritors are for wealthy parents: predisposed to two unfortunate outcomes: • Early attachment and secure love from parents during • Traveling through life experiencing only glimpses early childhood (ages 1 to 5) are fundamental to of the freedom and power of wealth. personal identity. Parents must be physically present • Perpetuating the same conflicts and ambivalent and emotionally available. Attend to the child and reactions upon the next generation, recreating the the child will feel safe and secure in the world. Very pattern through the parenting mistakes they expe- early childhood development is connected to money rienced themselves. maturity only by crafting the basics of good per- sonality in general. If they are to inherit and use money wisely, wealthy • Initiative, responsibility, and appropriate discipline children must develop a well-grounded set of skills and during middle childhood (ages 6 to 12) are neces- understanding about money along with their grounding sary for self-esteem and later autonomy. Parents must in general personality. In his insightful analysis of money require effort by their children, allow struggle, and maturity in general, Kinder [1999] offers a developmental encourage action. Children need to be given visible approach to this process. He proposes that there is a gradual chances to lead and take center stage, in front of progression for all people from a child-like innocence family and friends, so they gain mastery over risk, about money, up through the stage of achieving compe- manage fear, and taste achievement. A core lesson tent knowledge about financial matters, and ultimately is that appropriate expectations are good and will to a visionary understanding about money’s power and be encouraged, with accountability. limitations. While not referring specifically to the wealthy, • Increased responsibility must be tempered by con- he discusses how some people have a style of relating to sequences and limit-setting in adolescence (ages 13 money of either “innocence” (not knowing or caring to 18) to offset entitlement and develop a personal

FALL 2007 THE JOURNAL OF WEALTH MANAGEMENT 17 and social conscience. Parents should encourage Schervish cites five elements as most important in independence and social responsibility while the intergenerational transmission of financial caring: enforcing consequences. • Financial literacy must be taught throughout child- • Acceptance that new historical circumstances are hood in age-appropriate steps in order to create different from those the parents faced—a flexibility financial competency in adulthood. Young people in mindset that accommodates change. must be prepared to understand and make basic • Effect of the parents’ lifestyle—including household choices about money by the time adulthood arrives. duties and responsibility—by which parents com- Waiting till age 18 doesn’t work and creates major municate the achievement ethic to their children. problems. • Healthy parental modeling around spending and • The allowance is a major method by which financial philanthropy. literacy can be taught. Allowances are neither enti- • Formalized training about money issues. tlements, reimbursement for doing chores, nor easy • Explicit teaching of “frameworks of consciousness” sources of punishment for bad behavior. They are par- that teach moral issues around money and wealth. ents’ best means of teaching money skills and money attitudes consistently over time in a progressive way. The thoughtfulness by which parents teach their • At a very young age, young people should start par- children seems to be connected to the parents’ own stage ticipating and sharing in philanthropic activities, not of development and self-understanding. If parents have just by giving money but through active, hands-on grown to a more mature view of money and wealth, they efforts. are then able to convey it to their children, who might • Parents must be in control of their own individual otherwise find themselves confused or caught up in a con- and collective behaviors about money, since chil- sumer society. In the final analysis, the best way to raise dren learn the most from watching and sometimes responsible children with wealth may be to first make sure must choose between what parents say and what we are responsible adults with wealth. they do. As Willis [2003] notes, the most impor- tant values in life are caught, not taught. From Conflict to Reconciliation and Beyond—Resolving The Inheritor’s Other useful lessons include: encouragement to par- Dilemma in Adulthood ents to be open about family finances in a way appro- priate to each stage of early development, involvement We have noted how certain parenting activities can of children in giving to charity by example rather than forestall the personal derailing endemic to inherited wealth, just by exhortation, and the need to challenge children a form of primary prevention that minimizes later malad- to think about doing real work in their lives despite their justment. In this section we focus on how to get personal financial security. development back on track after damage has occurred. But The findings of Schervish [1995] give hope to what for those Inheritors who advance into adulthood, a ques- can be accomplished with responsible parenting. In his tion arises: How representative are the painful descriptions study of wealth and philanthropy, he interviewed 130 mil- of wealth adjustment? Don’t many Inheritors simply accept lionaires to explore how families of new and old wealth their wealth, take up their roles in life, and remain uncon- passed on moral values to their children. He found great flicted about their fortunes? Might the samples of angst- concern and effort by parents to teach messages about ridden heirs be self-selected to show poorer adjustment values and responsibility actively, leading to a good degree compared to those more quietly comfortable with their of success in the outcome. There was a positive impact fortunes? Perhaps those participating in psychological studies in the next generation’s evolving from the self-interest of are simply more willing to share their stories in these reflec- childhood to a broad concern for issues involving other tive projects, compared to those at the extremes who are people. As we will note shortly, his work points out how either more content or more self-destructive. reconciling wealth with one’s place in society helps resolve Undoubtedly, many wealthy heirs do not feel much many Inheritors’ conflicts around the meaning of money conflict around their wealth, remaining either innocent in their lives. (in the Kinder [1999] sense of money maturity) or adept

18 ACQUIRERS’ AND INHERITORS’ DILEMMA FALL 2007 due to healthy parenting and good values. But for many Reconciliation with Wealth through others, the presence of wealth does trigger deep personal Personal Recovery conflicts that must be resolved in order to grow and thrive. From the literature on personal development of those Many heirs seek out and benefit from psychotherapy, raised with wealth, it seems the commonly-cited disor- personal coaching, or some form of personal and spiritual ders of narcissism, passivity, dependency, entitlement, or growth to aid them in their journey toward a better adjust- immaturity accurately represent one phase of psycholog- ment. In the Conflict state, therapy can help them come ical adjustment, admittedly a common phase from which to terms with their mixed feelings about wealth, and begin many Inheritors never advance. This level of wealth matu- to gain some distance in their relationships with parents rity is marked by some form of painful conflict where and family. It can also help them make effective life choices wealth has overwhelmed and possibly contaminated the and career decisions. Therapy with heirs must take into development of a strong individual identity. The Con- account the special issues, needs, reactions, and circum- flict phase is characterized by a lack of integration of iden- stances affected by wealth (Pearne, Blouin, and Gibson tity and wealth, where the Inheritor’s Dilemma remains [1999]; Domini, Pearne, and Rich [1988]) if it is to be partly or wholly unresolved. successful. Fortunately, the Conflict phase does not have to Adjunctive to therapy, in the past two decades groups remain an end-point. It can be but a way-station along of Inheritors have also come together to share their the journey to a second phase of acceptance, reconcilia- common experiences and concerns. These groups try to tion, and integration with wealth. Individuals reaching stay private, out of the limelight, and provide a safe, under- Reconciliation with their wealth are no longer hobbled standing, and confidential environment for this work. The by the guilt, shame, fear, grandiosity or insecurity promi- growing body of literature that uses interviews with heirs nent when wealth and identity conflict. As Schervish and clarifies the many elements needed to help each other. A Herman [1988] note about individuals with wealth, prominent example is The Inheritance Project, created by “...(t)here is a developmental pattern of moving from several heirs in the early 1990s as a research and educa- having to deal with their wealth to wanting to use it pro- tional center. Through Trio Press, they have produced a ductively, to finally liking it or finding pleasure in the cre- series of monographs (Kiersted, Gibson, and Blouin ative control over their wealth” ( p. 74). Similarly, in [1995]; Gibson, Blouin, and Kiersted [1994]; see also Stephen Rockefeller’s [1996] characterization of the evo- updates at www.inheritance-project.com) that talk about lution of the Rockefeller family over five generations, he Inheritors overcoming common challenges in developing describes the necessity for this journey to self-identity: a positive personal identity and life path. Sociologists Schervish, Koutsoukis, and Lewis [1994] “A person will not be really happy in the midst of provide insight into a coping mechanism that may help wealth, finding an enduring sense of satisfaction both Inheritors and Acquirers make sense of the dilemmas and meaning, if as a consequence of having it, his of wealth. In the life stories of 12 of the 130 millionaires or her unique individuality has gone undeveloped interviewed for their study (including four heirs), an for whatever reason. Furthermore, if people do not intriguing finding was that the more psychologically feel that what they are doing proceeds from free healthy individuals framed their life stories as meaningful choice and is a way of developing and expressing narratives. These narratives served as developmental their own creative abilities, the benefits of their “myths,” organizing themes about wealth that show the work to others will be limited.” (p. 5) individual overcoming adversity and moving toward a dis- covered life purpose. To develop a sense of self-worth and This comment touches also upon the potential of a direction, the study subjects had found a way to explain further phase we shall explore, one where the heir reaches and understand the presence of wealth in their lives. A a stage of commitment to an altruistic life purpose. As recurring theme was that discovering how to do some- we shall see, more is becoming known about what thing worthwhile or worthy served to justify their good enhances the odds that Inheritors will achieve peace and fortune. purpose with their wealth. The Inheritor’s Dilemma can Schervish and his colleagues coined the term hyper- be resolved. agency, the special responsibility that those of exceptional

FALL 2007 THE JOURNAL OF WEALTH MANAGEMENT 19 fortune experience because of being wealthy, as a key • Be responsible for becoming aware of and using aspect of their lives. Hyperagency is a form of social one’s wealth. and psychological power whereby, having wealth, the indi- • Create relationships based on communication, love, vidual has an extreme level of “the ability to determine trust, loyalty, and compromise. conditions and circumstances of life rather than merely • Find a calling in life, based at least partly in getting living with them” (Schervish et al. 1994, p. 8). In their life an education. stories, the wealthy defined themselves as having over- • Develop character by what one does and who one come significant obstacles in order to use their wealth in is, not through one’s money. a productive way, as part of a good life. Other accounts by wealthy heirs share this moral dimension through tales The process of growth involves moving money from of overcoming the obstacles of wealth to use money with the foreground to the background in identity, using dignity, virtue, and even spirituality (Coles [1977]; Hausner wealth mainly as a resource for achieving one’s goals and [2005]; Domini, Pearne, and Rich [1988]; Goldbart life purpose. [2001]; Willis [2003]). The aptly named The Inheritor’s Sherpa by Myra Salzer Several books by wealthy Inheritors document the [2005], a financial advisor and wealth counselor, uses the struggle to develop a sense of positive self-worth. This is metaphor of a knowledgeable guide who assists others in especially common in women Inheritors. Jessie O’Neill’s the climb along the path from confusion, doubt, and aim- [1987] account of pain, self-doubt, and self-destructive less dependence toward the higher ground of purpose behavior was an early account of the parental dysfunc- and direction. Her encouragements about developing self- tion often inherited with wealth. Her description of discipline, resisting inertia, taking risk, and pursuing goals parental neglect, alcoholism, and isolation, subsidized by reinforce our growing understanding about answers to vast family wealth, expanded on Levy’s [1986] use of the the Inheritors’ Dilemma. term affluenza as recognition of wealth’s insidious influ- Surveying the landscape of adjustment for both ence, its ability to be passed on from one generation or Inheritors and Acquirers, Goldbart, Jaffe and DiFuria family member to another, and its capacity to infiltrate an [2004] posit five elements of positive wealth identity: otherwise healthy individual with distressing consequences. As in the narratives of other heirs able to overcome the • A sense of personal security and self-esteem. conflicts of wealth, O’Neill took up a career of social ser- • A lifestyle that is balanced and derives pleasure from vice and psychotherapy to support those in a similar appropriate use of wealth. struggle. • The ability to trust other people in intimate rela- Thayer Willis [2003], who like Jessie O’Neill has tionships. become a wealth counselor, suggests: “(I)f you have inher- • Acceptance of stewardship of wealth for future gen- ited substantial wealth, then you know that it is harder erations. for you than for most people to achieve a sense of pur- • Financial awareness and capability in managing pose and competence” (p. 1). She has written how the wealth. heir’s struggle must begin with facing the “dark side” of wealth, where wealth that is intended as a gift of infinite The authors have designed an assessment tool promise and possibility is experienced as stifling, con- (Goldbart, Jaffe, and DiFuria [2003]) to measure each of fusing, scary, and painful. Her unique contribution is the these dimensions, Self-rated from –5 to +5 on a subjec- emphasis that spirituality and religious devotion can pro- tive scale, these dimensions produce a profile whose con- vide a path to overcoming the identity conflicts inher- figuration captures the individual’s relative security, wealth ited with wealth. This devotion assists in achieving balance, anxiety, risk tolerance, spending attitudes, and philan- acceptance, and purpose. She is particularly effective in thropic focus. They propose the use of this profile by showing how an heir, while not having to work for money financial advisors as a guide to counseling the wealthy to survive, must nonetheless find ways to do something client along the path toward better adjustment and money worthwhile, often in the form of a career in social ser- maturity, i.e., from Conflict to Reconciliation. As we vice, arts, or social action. Willis’ major prescriptions are shall see, their use of a stewardship/legacy dimension is familiar ones: echoed in other writings about adjustment to wealth

20 ACQUIRERS’ AND INHERITORS’ DILEMMA FALL 2007 (e.g., Collier [2006]), since philanthropy and financial participation and leadership in the family philanthropy. stewardship are much greater components of personal This path has many positive effects. Heirs can find their growth for the wealthy than may be the case for the gen- own productive purpose and career with the added ben- eral economic public. efit of not feeling competitive with their wealth-creating parents. Families can also come together in mutual collab- RESOLVING THE DILEMMAS OF WEALTH: oration across generations, as first-generation entrepre- THE ROLE OF PHILANTHROPY neurs see their children and grandchildren taking on careers AND SOCIAL PURPOSE and giving away some of the wealth that has been earned. Abby Stranahan (in Stone [1997]) expresses aptly For Acquirers and Inheritors able to reach recon- the mixed feelings many heirs have about not doing paid ciliation with their wealth, life achieves a sense of balance work and not creating wealth, the benchmark in society and purpose. Unburdened by having to earn money to for being productive and therefore worthy. Although she support living, the wealthy individual may find commit- was involved in the family philanthropy, she notes: ment to paid or unpaid work, a good marriage, respon- sible parenting, and community service or philanthropy “I know I’m doing important work, but I still consistent with personal and family values. This is life would like to have a paid job. I don’t want my with purpose, an admirable achievement for anyone. whole identity tied up with doing things that only Philanthropic activities are a natural part of healthy someone with money can do. The third generation adjustment to wealth. They also are a key factor in devel- in this family has had more trouble with money oping the human and social capital necessary to sustain and careers than the second generation had. We wealth across generations (Jaffe [2003b]; Hughes [2004]; work hard, but we’re not making money.” (p. 55) Collier [2006]). Involvement with philanthropy and social action can take several forms, some of which are prac- Yet Stranahan emphasizes how participation in the tical and some of which are more spiritual. family foundation was instrumental in her personal On a practical level, philanthropy can serve as a development. useful activity as well as a means of integrating the ben- efits and responsibilities of wealth. The transition from “Knowing we had a foundation that had a clear individual and family self-interest to concern for others purpose, that I agreed with its goals, and that I was helps to overcome some of the ambivalent feelings of guilt genuinely encouraged by the board to participate and shame about one’s fortune. By doing something to in the foundation, gave me a different perspective give back to society, wealth’s immigrants and natives can on my family’s position. I could feel okay about each come to terms with the emotional struggles about having money because we were giving it away and being very rich. As part of this shift, the individual may doing good things with it.” (p.55) become more comfortable choosing a lifestyle of affluence with less doubt or anxiety. As the money gains purpose, Beyond the pragmatic level of philanthropy lies so does the individual. He or she becomes involved in another stratum of integration between identity and careers in social activism, philanthropy, community ser- wealth. For some, the melding of Self and Wealth forms vice, and the arts. a creative power turned outward to the world in altruistic Philanthropy can also be a career path for the heir service to humanity. It is, in essence, Purpose with a cap- who does not need to earn money and who cannot outdo ital P, beyond the individual sense of purpose achieved his parents as wealth creators. When a family has a great with normal integration with wealth. This degree of fortune well-managed internally or by outside advisors, wealth adjustment may represent not just an answer to family members may not be motivated to generate more the Acquirer’s or Inheritor’s Dilemma but a wonderful money for the family. Many heirs may also have neither rearrangement of the pieces themselves. the inclination nor the talent to be successful entrepre- In a study of 100 wealthy donors, Ostrower [1995] neurs, certainly not at the level of the wealth-creating reports the vast majority felt that giving back was not generation. In some of the wealthiest families, develop- only a personal choice, it was an obligation. Donors men- ment of an heir’s personal identity is associated with tioned the usual benefits of giving as a means of coming

FALL 2007 THE JOURNAL OF WEALTH MANAGEMENT 21 to terms with guilt, of making their wealth acceptable to involvement with other people in society. As individuals society, and of emphasizing values that are important to use their money for socially-engaged goals, they truly pass on to the next generation. For some, however, phil- “inhabit their wealth.” Twist [2003] presents a compelling anthropy was seen as not only a social obligation but a argument that altruistic purpose is the most fulfilling des- spiritual one as well. It embraced the highest values of tination in the journey toward integration of Self and self, society, money, and service. She found that those Wealth. who were part of a religious or spiritual group were more likely to emphasize giving and stewardship as an impor- CONCLUSION: INTEGRATING tant life task. MONEY WITH LIFE Schervish, Coutsakis, and Lewis [1994] describe the developmental path some Acquirers and Inheritors take In this article, we have reviewed the two types of as they move from empowerment in their individual efforts journeys experienced by those who will be sitting across to a broader focus on their potential role and impact in the desk from a professional wealth advisor. There are the society. They note: first-generation Acquirers of wealth, those immigrants from other economic cultures who come to wealth. Then “If the first phase of psychological empowerment there are the Inheritors in generations two and beyond, revolves around feeling entitled and efficacious in those native-born citizens raised in affluence who come regard to one’s interests, the second entails self- from wealth. We have seen how different these life expe- reflective attention to the source and quality of riences are and how clients are shaped in important ways those interests. At this second level psychological by the origin of their wealth. We have also examined how empowerment becomes characterized by a set of the transition from one generation to the next is fraught orientations related to what psychologists call self- with potential dangers, detours, and dead-ends affected actualization and what spiritual traditions refer to by many factors, including the quality of parenting within as holiness or wisdom . . . the capacity of the families. wealthy to turn their attention inward in an effort The special challenges of the Rich come from the to evaluate the spiritual or moral quality of their inordinate freedom granted by wealth, the surplus of interests and propose to themselves a less self-cen- resources available beyond ordinary human needs, and tered set of priorities. Those who do so may be the ability to manage the world around themselves in ways described as having learned the spiritual secret of not possible for others. We acknowledge that the chal- money. The scope of their self-interest increasingly lenges experienced by the wealthy are present in different broadens and deepens to include a greater diver- ways for those with lesser means, since these are essen- sity of people and needs. If in the first phase of psy- tially the challenges of life. Development of healthy per- chological empowerment the wealthy base their sonality, maturity of money attitudes and skills, finding of public behavior on their private interests, in the purpose, and loving yet disciplined parenting of children second they base their personal concerns on public are all universal tasks. Nevertheless, we have attempted needs.” (p. 7) to show how wealthy individuals and families do have unique life journeys, as they must accomplish the devel- Religious organizations and philosophies have long opmental tasks of life with both the powerful benefits and supported wealth’s responsibility and opportunity for heavy burdens of great fortune. social welfare. In the secular realm, Twist [2003] has Awareness of these special challenges should be an written a powerful book, The Soul of Money, about the integral part of the background of every professional nature of money and philanthropy that best presents this wealth advisor. As the center of the relationship between spiritual perspective. Her book contains many accounts clients and their money, advisors are in a most favorable of the rich who discover they are impoverished by their position to help clients and their families achieve peace wealth in terms of genuine human relationships. These with the riches that are theirs. Our work implies that people are shown discovering the spiritual nature of advisors can learn from both the literature and the per- wealth and the true potential of money, not only for sonal accounts of the wealthy in order to provide the best making a difference in the world, but for genuine resources for their clients. By offering readings, referrals,

22 ACQUIRERS’ AND INHERITORS’ DILEMMA FALL 2007 and empathic support, advisors have the ability to perform Carnegie, A. The Gospel of Wealth and other Timely Essays. one of the most satisfying tasks in the consulting rela- Edited by E. Kirkland, Cambridge, MA: Harvard University tionship: assisting clients in overcoming the Acquirers’ Press, 1962. and Inheritors’ Dilemmas. Clotfelter, C,T., and P.J. Cook. Selling Hope: State Lotteries in America. Harvard University Press, 1989. ENDNOTE Clotfelter, C.T., P.J. Cook, J. Edell, and M. Moore. State Lot- Thanks to Fredda Herz Brown, Jay Hughes, Thayer teries at the Turn of the Century: Report to the National Gambling Willis, John Levy, Keith Whitaker, Joanie Bronfman, and Impact Study Commission. June 1, 1999. Brigitte Muehlmann for comments and feedback on early drafts of this article. Special thanks to Shelly Meier who ably assisted Collier, C. Wealth in Families, 2nd ed. Cambridge, MA: Har- with the final editing of the manuscript. vard University, 2006.

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